A political and legal battle that has spanned nearly three years, two elections and numerous court appearances is finally over in Pennsylvania. The Pennsylvania Public School Employees’ Retirement System (PSERS) and the State Employees Retirement System (SERS) have reached a settlement with the state auditor general’s office, led by Jack Wagner. The settlement ends a dispute over the right to audit the pensions between the auditor general’s office and the two pensions that began under Wagner’s predecessor, Robert Casey Jr.
Under the settlement agreement, the auditor general’s office will conduct a special performance audit of both pensions and enter into a contract with Washington D.C.-based Independent Fiduciary Services (IFS) to conduct a fiduciary review of the funds’ investment operations. They each will submit separate reports, which will be open to review and comment.
Also under the agreement, both pension funds will withdraw pending appeals before the Pennsylvania Supreme Court of last year’s Commonwealth Court ruling. The ruling handed Casey, who was then auditor general, the key victory in his fight to conduct a special performance audit on the two state retirement funds. The panel of seven judges with one dissenting ruled in October that the auditor general’s office has the authority to conduct the audit and ordered the two funds to provide necessary documents and otherwise cooperate with the audit.
The battle over the right to audit SERS and PSERS has raged for about three years. Casey began his quest to conduct one in August 2002, following the retirement systems’ use of 150 outside consultants and investment advisors.
PSERS manages about $52 billion and has invested in Adams Street Partners, Spectrum Equity Investors, TA Associates, Madison Dearborn Partners and Landmark Partners. SERS manages about $26.6 billion and its portfolio includes Apax Partners, New Enterprise Associates, Summit Partners, Blackstone Capital Partners, Lexington Partners and HarbourVest Partners.